Wackenhut Ceo Taking Aim At The Billion-dollar Threshold

But The Competition Is Stiff And Its Reputation Is Tarnished

September 7, 2003|By Marcia Heroux Pounds Business Writer

For 15 years, George Zoley has been an entrepreneur locked in a box.

Zoley, CEO of Wackenhut Corrections Corp., was severely limited in strategic moves because WCC was a subsidiary of security services firm Wackenhut Corp. For example, WCC couldn't swap stock to make acquisitions under a policy decision of its parent.

After WCC bought back the majority share of its stock in July, Zoley now is tasting the sweet fruits of freedom. The Boca Raton-based prison services firm finally has the ability and means to make acquisitions. WCC not only plans to add to its core corrections business but also to expand its reach to mental health institutions and detention centers for illegal immigrants.

"Next year we hope to be a billion-dollar company," Zoley said in a recent interview.

But WCC is facing a sluggish U.S. market for private prisons and is going up against its former parent and other aggressive competitors. The company also is struggling to polish its reputation, tarnished by accusations of sexual and physical abuse in its prisons.

WCC, which claims 21 percent of the U.S. corrections market and 41 percent of the international market, expects to begin making acquisitions in the next 12 months.

The United Kingdom is the company's first target country. Because of a change-of-control provision, WCC was forced to sell its joint venture holding in the United Kingdom when then-parent Wackenhut Corp. was bought by the Danish firm Group 4 Falck. Zoley said there's great opportunity in the United Kingdom, which has committed to privatizing all new prisons.

WCC may be going head-to-head for business with its former parent. Group 4, which already was a strong international competitor, recently won away WCC's contracts for Australia's detention centers. WCC said it retains a significant presence in Australia and New Zealand.

Federal contracts

Zoley, 53, began his career as a public servant, working in planning and zoning in Broward County and in operations and finance in Hollywood. He joined Wackenhut in 1981 and was made chief executive of Wackenhut Corrections in 1988.

Under his tenure, Wackenhut has become a NYSE-traded company with $569 million in annual revenues operating in the United States, Australia, South Africa, New Zealand and Canada. Zoley said his challenge was to develop a successful business model for a prison and replicate it.

"I think we are just beginning. That's the exciting part for me," Zoley said.

Prison-security companies face a tightening U.S. market overall, with shrinking state budgets and fewer prisons being built. WCC's largest U.S. competitor is Corrections Corporation of America, which oversees 55,000 inmates in 20 states. WCC is a bigger player internationally.

Zoley said most of WCC's growth has been in the federal arena with contracts from the federal Bureau of Prisons, U.S. Marshall and Bureau of Immigration and Customs Enforcement. Many new contract opportunities are related to Homeland Security.

WCC recently won a five-year contract worth up to $35 million with Department of Homeland Security for residential housing for women who are immigration detainees. Federal business constitutes 20 percent of WCC's revenues, "and we expect that to increase significantly," Zoley said.

James Macdonald, an analyst with First Analysis Securities in Chicago, said WCC's low-cost approach helps it win bids for government work. "They're willing to accept slightly lower margins than others in the industry. But they also take less risk."

Prison problems

Some of the risky business WCC has been involved in: operating prisons for women and juveniles. WCC is looking to remove itself from these more difficult and costly parts of the corrections business, so it is not bidding on any new business in these fields.

"Female facilities are more difficult to operate because of the inherent difficulties," he said because of the potential for sexual abuse. At female prisons operated by WCC, there are stricter policies now. Men cannot directly supervise women prisoners. Men who need to be in areas with women prisoners are escorted.

The Texas Department of Justice ended its contract with WCC to operate the Travis County Community Justice Center in East Austin after roughly a dozen employees were indicted in 1999 on charges of harassing and sexually abusing prisoners. Many of the employees were later acquitted. Several women who claimed they had been raped in the Texas prison brought civil lawsuits against the company.

WCC's decision to move away from riskier prisons also was influenced by a situation with a juvenile jail in Jena, La. In 2000, a jury found three former WCC employees guilty of assaulting an inmate, falsifying reports, and lying to investigators. WCC reached a settlement with the Justice Department to resolve charges of excessive force and neglect.